Five trillion reasons why IP is of fundamental importance to the US economy
12Apr12

Intellectual Property and the US Economy - produced by the USPTO and the Economic Statistics Administration, and published yesterday - confirms something that all of us knew already: IP is of fundamental importance to American prosperity and economic growth. And then some. According to the report, IP intensive industries are responsible for $5.06 trillion in value added or 34.8% of annual US GDP; they also directly or indirectly employ 40 million Americans. What’s more, those jobs tend to be well paid, being, on average, 42% higher than the mean salaries earned by people working in other parts of the private sector. And on top of all that, job growth in the IP intensive industries is currently faster than in other sectors of the economy. All in all, it’s quite a message.

Reading through what is clearly a detailed piece of research, you are left in no doubt that the protection of IP both domestically and internationally has to be a long-term priority of the US. Those wishing to tinker with IP regimes will need to bear that in mind. At home if you are, say, looking to reform the patent system even further, you are going to have to provide very strong evidence that what you propose will make things better (ie, lead to greater revenues, more jobs and higher salaries); while abroad, countries can probably expect to see even greater US diplomatic efforts – whether through bilateral treaties, multinational agreements and/or Special 301 and WTO actions – to protect what are deemed to be American IP interests.

I am not going to provide a summary of the whole report, you should be reading it yourself; but there are a few points that I think are worth raising:

• The contribution that IP is making to the US economy could actually be a lot higher than is recorded. As the USPTO’s chief economist Stuart Graham makes clear in an interview he did yesterday with IP Watchdog, the authors make some conservative assumptions: “Our estimates, while we took account of the upstream jobs – that is those jobs in the supply chain jobs that serve those industries – we did not take into account the downstream jobs – the jobs in distribution and in services that serve those industries and those employees. So this 40 million is a low estimate. It is a very conservative estimate of the total US employment impact of these IP-intensive industries.

• It’s also worth remembering that other studies have shown that many US companies – even in areas where you would expect IP issues to be important – have yet to engage with IP in any meaningful way. Think what would happen if even 25% of American businesses took IP seriously.

• What’s more, the report only covers patents, copyrights and trademarks. Other IP rights, such as trade secrets, are not included; neither are other types of intellectual asset. In terms of the entire intangible economy’s contribution to the overall US economy, we are bound to be looking at much higher employment and dollar figures.

• Given that we are talking about assets which directly or indirectly employ 40 million Americans, and help to generate trillions of dollars in revenues each year, there can be no real surprise that some patent portfolios sell for $1 billion plus, or that brands can be worth tens of billions of dollars. We are talking here about fundamental assets. The real surprise is that they have been sitting there for years going unnoticed by so many in the corporate and investment worlds.

• Finally, as a European I have to ask: where is the EU equivalent of this report? Why is it that, once again, the Americans are ahead of us? At a time when this continent is more IP sceptic than it has ever been before, this is exactly the kind of research we need to put the debate about IP into some kind of context. It is surely the case that, as in the US, IP industries in Europe employ millions and generate billions. But until someone bothers to find out, we are not going to know for certain. As a result, the debate about issues such as patentability and copyright protection will be held in a vacuum That suits some people, of course, but it does not lead to good decision making or policy.